CPO price upward trend not sustainable as demand expected to be soft — Thomas Mielke
The Edge Markets (16/08/2021) - KUALA LUMPUR (Aug 16): The current high price of crude palm oil (CPO) may not be sustainable as demand is expected to be soft in the upcoming months, according to ISTA Mielke GmbH (oil world) executive director, Thomas Mielke.
Speaking in the webinar organised by UOB Kay Hian Securities in collaboration with Bursa Malaysia Derivatives, Mielke highlighted that stronger demand is needed to fuel the current upward trend of the edible oil prices.
Graph: https://assets.theedgemarkets.com/pictures/20210816_cpo_3-month_futures.jpg
On CPO prices' projection for 2021, Mielke foresees that Malaysian CPO prices will be trading at a discount of US$30 to US$40 by year end to Indonesia's CPO prices.
"Indonesia's CPO price is currently trading at US$1,200 and by the end of the year, I am expecting it to trade around US$1,000.
"Also, Indonesia and Malaysia are expected to experience a decline in exports by 20% towards year end," he commented.
On the other hand, Mielke expects the global palm oil production to increase by only 2.1 million tonnes in October and September this year, adding that investment in mechanisation and large-scale replanting are needed to reverse the downtrend in average yields in the coming years.
He also noted that labour shortage remains a major constraint in palm oil production.